Facebook shares its big secrets

It's the internet phenomenon of the decade - dwarfing rivals, connecting hundreds of millions of users across the globe and consuming millions of hours of their lives.

But yesterday, the full extent of the Facebook empire was revealed when the company began its quest to raise billions of dollars by selling shares to private investors with and initial public offer or IPO.

The company filed the offer in an effort to raise US$5 billion ($6 billion) - more than twice what Google raised in its 2004 IPO.

It hopes to gain a valuation of US$100 billion - higher than the valuations of giant global media players such as Disney.

The share offer could determine the future direction of Facebook and its users, including millions of New Zealanders. Technology experts suggested the IPO would force Facebook to be more open about privacy concerns and release the findings of investigations into use of personal information.

It has lifted the lid on the huge business behind a company which is only seven years old - last year it had more than 845 million users and US$3.17 billion in revenue.

Facebook also said founder Mark Zuckerberg owned about 28 per cent of the company - meaning he would be worth $28 billion in shares alone if the company met its hoped-for valuation.

In New Zealand, Facebook has had an increasingly marked impact on society, where it's seen as everything from the source of internet bullying to a valuable tool for police to connect with their communities.

The latest World internet Project published by AUT last month found 86 per cent of Kiwis used the internet, and almost 64 per cent of those had a social networking profile - the vast majority on Facebook.

More than half Facebook's users log on on any given day.

Using software developed by others, they share songs, TV shows and photos of what they're wearing. Facebook says 250 million photos alone are posted each day.

To make money, Facebook sells the promise of highly targeted advertisements based on the information its users share including their hobbies, private thoughts and relationships.

Facebook also takes a cut from the money that apps make through its site. For every dollar "FarmVille" maker Zynga gets for the virtual cows and crops it sells, Facebook gets 30c.

For all its success, the company has had its share of troubles. It went through a series of privacy missteps as it pushed users to disclose more and more information about themselves.

But the Facebook story, brought to the screen in the Oscar-nominated film The Social Network, showed how much money could be made from a successful online enterprise, said Vikram Kumar, head of internetNZ. "Facebook is about the best story you can get."

Kiwi investors unlikely to get in on IPO

New Zealanders will be able to gain a financial interest in the social networking site when it goes public this year.

But financial experts warn that initial share prices could be on the high side, and Kiwis may have to wait months before they can get their hands on any stock.

It is likely to debut on the New York Stock Exchange or the Nasdaq stock exchange in three of four months.

One local sharebroker told the Herald that the banking giants handling an IPO (in Facebook's case Morgan Stanley and Goldman Sachs) tended to give their big clients the first bite at any available stock.

"It probably won't be easy for you and me to be able to receive shares in the IPO."

The broker, who did not want to be named, said the high demand for Facebook shares would also make it difficult for retail investors to get involved in the IPO.

"You are talking about the most popular [stock market] float the planet's probably ever seen, next to Google and a few others. The good clients of [lead banks in the IPO] will be getting the stock."

He said New Zealand investors would have "plenty of opportunities" to buy shares when regular trading began later this year.